Lew calls for replacing sequestration

Treasury Secretary Jack Lew said on Thursday that Congress should replace the across-the-board spending cuts known as sequestration with “commonsense” spending reductions while a broader budget deal is considered.

Lew said sequestration is weighing on the economy and needs to be addressed.

Story Continued Below

”We need to replace the harmful, across-the-board cuts known as sequestration with commonsense measures that rein in spending,” Lew said at a speech at the Center for American Progress in Washington. “These cuts were designed to be so mutually disagreeable that they would compel Democrats and Republicans to come together to create sensible and balanced deficit reduction policies.”

Lew’s remarks come as lawmakers prepare for budget negotiations that are set to conclude later this year. What these negotiations between congressional Republicans and Democrats can achieve — such as a targeted deal on sequestration or something larger — remains unclear.

Lew emphasized that a larger deal should include tax reforms and spending priorities the administration believes would boost the economy.

“But any bipartisan agreement should be animated by a commitment to doing two things at once: rebalancing fiscal savings to reduce our medium and long-term deficits while taking steps now to make our economy more competitive,” Lew said. “So as we pursue a path of fair and balanced deficit reduction, it is crucial that we close wasteful tax loopholes, eliminate costs where it makes sense, and use some of the resources we free up to make targeted investments in a few key areas like manufacturing, infrastructure, and education.”

Larry Summers, a former economic adviser to President Barack Obama, also spoke at the event and said that lawmakers should emphasize growing the economy above lowering the deficit.

“The truth is, that if we grow and we actually accelerate the growth rate the debt will get itself managed,” he said. “And if we don’t, we do all of these programs and cuts and the debt will not get itself managed.”

Summers added that boosting employment, not deficit reduction, should be the top policy goal.

President Barack Obama had been considering nominating Summers to be the next Federal Reserve chair, but last month Summers took himself out of the running because of concerns raised by some Democrats that he wouldn’t be a tough regulator of Wall Street banks.

He said the recent deal to re-open the government and extend the government’s borrowing authority was no triumph but rather a “reprieve from the grotesque.”